Asian Americans Could Use More Education About Retirement Planning

A MassMutual study finds Asian Americans are more thoughtful retirement investors than other demographics, but they lack education about how long they will need to make their savings last and the timing of claiming Social Security.

Asian Americans are more concerned than other demographics about making missteps with their retirement savings in the years just before and just after retirement, research from Massachusetts Mutual Life Insurance Co. finds.

According to the MassMutual Asian American Retirement Risk Study, Asian American retirees and pre-retirees worry more than other Americans about taking too much risk (69% vs. 44%) or making a poor investment decision (67% vs. 54%) within 15 years before or after retirement. Asian American pre-retirees (75%) are especially concerned about taking too much investment risk.

“While many Americans focus on being ready to retire, no other ethnic group that we’ve surveyed is as focused on their financial goals as Asian Americans,” says Wonhong Lee, head of MassMutual’s Diverse Markets. “And these findings are actually aligned with other studies we have conducted in the past, as the key driver for this community is to attain financial security in every key milestone in life, such as paying for their children’s education or retiring in comfort without being a burden to their children.”

More so than others, Asian American retirees and pre-retirees believe workers approaching retirement should reduce their investments in equities (64% vs. 53%). Moreover, Asian Americans are more likely to have more conservative investment goals, aiming for their assets to “match the market” (43% vs. 32% of the general population) rather than outperform the market (55% vs. 65%). Despite those sentiments, the study found little difference between Asian Americans and the general population of retirees and pre-retirees in regard to their overall risk tolerance or their allocation of retirement assets between equities and fixed-income investments.

Asian Americans do have a stronger preference to be heavily involved in managing their finances and investments, particularly among retirees. Compared to the general population of retirees, for instance, Asian American retirees are more likely to enjoy managing their own money (80% vs. 59%). When looking only at Asian Americans, only two in five retirees (42%) prefer an investment that allows them “set-it-and-forget-it” compared to nearly three in four pre-retirees (72%).

Underscoring their focus on investment goals, Asian Americans are considerably less likely than other Americans to engage in behaviors that reduce retirement savings such as making withdrawals or hardship loans or suspending contributions, according to the study. While one in four American retirees and pre-retirees (25%) report engaging in those behaviors, Asian American respondents are half as likely (11%) to say the same.

Despite their hands-on approach to investing, the study findings show there is room for Asian Americans to obtain more education about retirement planning. Fewer Asian Americans are confident projecting how many years they will spend in retirement and therefore are not planning to meet those needs, the study shows. More than half of Asian Americans (53%) are uncertain about the length of their retirement compared to a little more than one-third of Americans overall (36%). Moreover, fewer Asian American retirees (63%) are confident they know how to claim Social Security at the right time to maximize its benefits, than American retirees overall (75%), according to the study.